By JD David, Myler Capital – Football fans are painfully aware that the amount of actual play time in a three-plus hour NFL game is roughly just 11 minutes, according to a (slightly dated) WSJ article. Put another way, it’s two hours and 49 minutes of watching something other than football.
Anyone that has ever attempted to raise a fund likely has experienced something very similar. A lot of preparation, a lot of travel, a lot of follow-up and a whole lot of wasted time.
But what is much less apparent is why fundraising involves so much wasted time.
I’m not talking about the time spent pursuing potentially interested prospects as they go through their diligence process. I’m referring to the time wasted pursuing almost everyone else.
Broadly speaking, you can put these productivity-sucking conversations into two categories:
1. The time spent pursuing the “wrong” investors… those that probably never cared in the first place and likely will never care again.
2. The time spent pursuing the “right” investors but doing it the “wrong” way…basically, all of those unproductive interactions due to poor positioning or sales process.
The focus here is on the former – time lost due to chasing a poor “fit.” This is typically due to a manager’s lack of appreciation for what problem they are actually trying to solve. And no matter what it is, when it comes to a typical institutional investor, good performance is only a part of the solution.
Turning back to football…
Remember the movie, Invincible… Mark Wahlberg plays Vince Papale, a Philadelphia native that makes the Eagle’s roster after a community-wide open tryout?
While he would never have gotten the look if he couldn’t perform, of course, the story makes it clear that the reason he was selected for the team was because he offered something else that the organisation needed (a tremendous attitude and work ethic). Recall the guy he beat out was actually more athletic.
Contrast this with all of the others that came to the tryouts. Sure – some were just there for the thrill, it’s likely that most players that attended truly believed they had a shot to be considered for the team.
Conceptually how do you blame them? After all… they were football players and the Eagles were in desperate need of new players. A match made in heaven!
Of course, no rational, impartial observer would ever agree with that, but you have to admit, there is a certain logic to it.
And when you think about it – how is this really any different than the logic that investment managers use to rationalise practically any meeting they have with any allocator (“I’m a manager looking for a slug of money and they have a slug of money to invest in a manager…”)
You want a match made in heaven? A better bet is to focus on those investors that value what you value and those whose “problems” your strategy or approach is well-positioned to solve.
As one investor put it to me, “my job is pretty straightforward…to allocate capital. Therefore, I need to see interesting deal flow. Managers and marketers are actually doing me a favor by showing me ideas. But unfortunately very few actually help me – mostly because they were never intended to help me. They were only intended to help the manager.”
In his words, “You may very well have an incredible strategy – but I have an agenda to manage. So while I will always pay attention, there is very little chance of me taking aggressive action on something that doesn’t advance my agenda.”
Similarly, a player attending the Eagles’ tryout may have argued that the team was just a couple of out-of-shape schlubs away from making the playoffs, it would have been a tough sell from the start given the coach’s perceived needs.
That all said, the obvious question becomes, how do you ascertain a good fit? I’m not saying it’s easy – the number of funds clamoring for attention is overwhelming – but technology helps tremendously in uncovering the clues. Some thoughts…
1. Start by picking a side…and then be willing to take some “marketing risk”
One of the biggest issues is that managers are often afraid to say what they really believe for fear of alienating investors on one side or the other. But the “all things to all people” approach by its nature will put you in just as many low probability rooms as high probability rooms. Have an opinion and then publish it. Blog post, white paper, thought-provoking video…whatever. Oh – and if regulatory issues, concerns of giving away the secret sauce or just lack of time are still holding you back…it’s time to re-evaluate and re-prioritise.
2. Give your audience an opportunity to “self-select”
If you position yourself as a thought leader and add value based on your interesting opinions, you can’t help but to attract like-minded people. From there, analytics can do the heavy-lifting of profiling interest by measuring specifically who is interacting with your information, how often they are interacting and even the extent to which that interaction has momentum behind it. The days of blindly traveling across country for a one hour meeting with a random investor should be behind you. Let the data guide you, just as you would with an investment decision. Ask yourself…is it really a smart use of time to see an investor that couldn’t even take the time to watch your three-minute video? And that information doesn’t cost much or require a lot of incremental time.
3. Populate your database with investors that have a demonstrated interest…
There are some fantastic tools to understand where to best direct your focus. After all – if you are going to make a target list of investors, why not start with those that you know with certainty are interested in managers that look and smell like you.
Take FINsearches – the database is ideal for identifying a potential fit. It allows you to search current RFPs, dissect plan sponsor fund portfolios and ascertain appropriate consultant contact information, and even scrape your competitor’s list of investors for potential target sponsors.
4. Invest in Valuegraphics
What people value determines what they do. By understanding what it is that your audience values, you can position your message to better influence their decisions. Valuegraphics is a social-science tool that uses big data to enable organisations to profile the values of an entire audience to determine more accurately what motivates their behaviour.
5. Stop selling and start building a relationship. Then you can just ask…
The great thing about content like thought leadership pieces and video is that you are able to build a rapport with your audience without a direct dialogue, creating the seeds of a genuine relationship. And once you have a genuine relationship, getting answers to direct questions always become easier.
Admittedly, this all requires hard work and an investment of time. But that investment has the ability to compound and create real long-term value. A much better use of time than an assortment of random unfiltered meetings with easily forgotten prospects.
It’s time consuming – but isn’t that much better than time wasting?
